Fidelity launches inflation-friendly insurance products


Eric Chiriga

ZIMBABWE’S persistent inflation is eroding the purchasing power of benefits from pension plans and therefore, they should be inflation-adjusted to cushion pensioners who are

struggling to make ends meet.


“Current pension plans are not inflation-adjusted so the value of benefits that are supposed to be obtained by pensioners is eroded by inflation,” said Wilfred Maruni, Fidelity Life Assurance (Pvt) Ltd group pensions general manager.


Maruni expressed these sentiments at the launch of two of the company’s products – Living Annuity Plan and Paramount Plan – last week.


He said existing pension plans did not have their benefits paid in relation to the level of inflation and the purchasing power of the benefits was reduced each time inflation increased.


The benefits are pegged at the same amount throughout the payment period and they tend to lag behind the ever-increasing rate of inflation.


Inflation has reached 426,6% for August and pension plans whose benefits vary in relation to the level of inflation are the best options to consider.


Inflation is contributing intensely to the cash crisis prevailing in the country.

There is a serious shortage of cash and the government has introduced a new $500 note, a $1 000 one and bearer cheques to try and alleviate the problem.


“We have come up with these innovative products to cushion pensioners in this hyper-inflationary environment,” Fidelity managing director Simon Chapereka said.


The Lap is a pension product that provides inflation-adjusted pensions through its investment-linked arrangement.


“A level pension is pegged at the same amount throughout the payment period and we came up with Lap to solve this,” Maruni said.


He said Lap is targeting the retiring and retrenched workers.

A member must have a capital sum of at least $1 million to qualify for the package.


Under Lap, the member’s monthly payout will be increased by bonuses every six months.


The bonus payment will be 5% of the investment returns and will be fluctuating.


“The Paramount Plan is a policy with a life cover, a predetermined maturity term and a payout every fifth anniversary,” Chapereka said.


This policy becomes paid up after three full years’ premiums or more have been paid.


Also under the Paramount Plan, if death of the policy holder occurs before the first five years, the full sum assured becomes payable.


If the policy holder dies after the initial payment of the predetermined bonus payable over five years, the percentage of the sum assured that has not been paid becomes payable.


In the event that death is caused by an accident the amount payable is up to $500 000, plus the sum assured.


If the policyholder survives to the end of every five-year period, a predetermined percentage of the sum assured is payable.


Both Lap and paramount plan target the retired and self-employed.

Fidelity is the country’s first company to introduce such inflation-friendly products.

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